Some property will clearly always be sought after and people will be willing to pay a hefty price to get their hands on it.
BY VANESSA DE GROOT
Recent research by RP Data has found that the number of suburbs in Australia with a $1 million or more price tag increased by 35 per cent over 2010. This is despite the fact that capital city home values only increased by 4.7 per cent last year.
In the December quarter last year, 212 suburbs across the country had a median price of at least $1 million. Of those 56 per cent were in Sydney, 20 per cent were in Victoria, 12 per cent were in Western Australia, six per cent were in Queensland, three per cent were in South Australia, two per cent were in the Australian Capital Territory and 0.5 per cent were in the Northern Territory.
One of the most surprising results is Perth – the property market in Western Australia’s capital hasn’t exactly fared the best in the past couple of years – in fact, it’s really slumped over the past 18 months or so, but some 12 per cent of its suburbs are in the million-dollar range.
The suburb of Peppermint Grove, close to the Perth waterfront, is the most expensive in Australia, with a median house price of $4.6 million.
It’s almost $1 million more expensive than the second placed suburb of Vaucluse in Sydney.
RP Data senior research analyst Cameron Kusher has noted: “over the past five years the premium sector has typically fared quite well (outside of 2008) and has recorded strong growth in property values.”
In 2005 just 78 suburbs had medians of $1 million or more and that has consistently grown (with the exception of a drop in 2008) to 212 in 2010. In 2009 the number of suburbs was 157, increasing by 35 per cent to reach the current 212.
In just five years, the number of $1 million-plus suburbs has increased by 172 per cent.
In his analysis Kusher says that the growth in million-plus suburbs indicates that residents are prepared to pay the hefty price to secure a property in a premium location.
For a while I’ve been leaning towards the ‘affordable property’ argument side, where experts contend that affordable property will be in more demand, so that’s what investors should be buying. But these results have made me rethink that somewhat.
Excluding the hiccup in the property market around 2008, after the global financial crisis, there has been a fairly big jump in the number of million-dollar plus properties in the past five years. Between 2005 and 2006 as well as 2006 and 2007 there was a 40 per cent increase and then between 2009 and 2010 there’s been a 35 per cent increase.
No matter what the economic conditions are, I think premium properties in good locations will always be sought after – there’ll always be a market. While it might be difficult to offload a property worth, say, $20 million during a financial downturn, it seems that properties in the lower range will still sell and for a good price.
Kusher believes such a sizeable increase (of around 35 per cent) isn’t expected for this year, with the residential property market expected to slow and the premium market is also to be impacted by high interest rates and ongoing global economic uncertainty.
It’ll be interesting to see just how many suburbs do make it into the million-dollar club this year though…
Vanessa De Groot is the deputy editor of Australian Property Investor magazine, www.apimagazine.com.au